Today, original creditors, such as financial institutions, credit card issuers, utility companies and other service providers lose millions of dollars from uncollectible customer accounts. An original creditor may refer a customer's account to collections (hereinafter “delinquent account”) when no payment has been received at the end of one or more billing periods. Most original creditors have a collections department, in which delinquent accounts may be segmented into buckets. The buckets may identify the billing cycle that a particular delinquent account falls under. The buckets may generally relate to a length of time that a delinquent account is past due, for example, 1-30 days, 31-60 days or 61-90 days. The buckets may further be divided into smaller risk segments, for example, High Risk (low credit score, defaulted on last payment plan and several past bad debt accounts in the last 12 months) or Medium Risk (average credit score, history of on-time payments and less than 2 past bad debt accounts in the last 12 months).
Each of the bucket-risk segment combinations described above may roughly correspond to a particular set of treatments. For example, a delinquent account which has just entered collections (bucket 1) and is likely to pay the money back (low risk segment) may receive only a nicely worded reminder letter, or no action by the original creditor. After several consistent payments, the original creditors may “re-age” a delinquent account and may bring it back to a current status. A long overdue delinquent account which has a very low chance of repayment (high risk), may be charged-off by the original creditor; the balance of the delinquent account may either be sold or outsourced to a collection agency or other type of debt collection entity. The original creditor may also note the charge-off on the consumer's credit report for several years. An original creditor may also send a delinquent account to litigation, e.g. depending on the outstanding balance of the delinquent account.
This segmentation approach presents several problems although it bears some merit and may have been successful in the past. For example, the segmentation approach may create a system with a spaghetti-like environment, unprincipled and complex segmentation boundaries, non-optimal mappings between segments and treatments, and numerous rules. In another example, the segmentation approach may lack the ability to automatically learn and adapt to changes in the environment. In a further example, the segmentation approach may also suffer from an inability to rapidly apply aggressive treatments to a delinquent account that may currently be in a segmentation bucket that prohibits such aggressive treatment.
Therefore, there is a need for a system to evaluate the effectiveness of different treatments for delinquent accounts and provide dynamic treatment recommendations for changes in the environment of delinquent accounts.